Home / This Week / Cover Stories / Food businesses feeling the pinch of rising inflation

Food businesses feeling the pinch of rising inflation

Eating out is a great privilege and perhaps one of the only available forms of entertainment available in Pakistan. Various options are available in the form of food festivals, pop-up restaurants, home-based food businesses, road side cafes and ‘dhabas’ etc. which shows that the food culture is thriving. With the devaluation of Pak Rupee, purchasing power has seriously been affected due to high inflation and stagnant wages. This, in turn, may directly affect the food business if it has not been affected already.

In a bid to reduce food imports and boost local industry, the government has imposed sizable duty on imported goods and has also amended the import policies according to which the ingredients must be clearly mentioned on imported items and should be accompanied with a Halal certificate. As a result of this, many restaurants that rely heavily on imported food items are finding it hard to operate under the new tax regime. From importer to consumer, the entire food chain has been affected. Prices have gone up considerably which is hurting the food culture.

Restaurant owners are of the opinion that since Pakistan’s agriculture industry lacks the variety and quality of food, hence the ingredients served in international cuisines could not be replaced with local ingredients. The import duties may be beneficial for Pakistan in the long run but in the short term they are proving to be detrimental for food businesses. The basic idea behind it is to replace imports with local substitution but the task may not be easy.

 

In the wake of import laws and inflation, food businesses are surviving, some by raising their prices while others have taken a hit on their margins. There are very few restaurants that do not pass on the impact of rising prices to consumers as the cost of materials is increasing weekly but they cannot change their menus daily or on weekly basis. On the other hand, lay-offs/downsizing and demand for higher salaries by employees of restaurants has become commonplace.

The markets have essentially been regulated to assist in stabilizing the heavy influx of imports in Pakistan, reduce the trade deficit and ultimately benefit the economy. However, there are a lot more factors at play and the new policy’s effect on the food industry is only a tiny facet of the situation. On the other hand, import tariffs will not significantly affect the import bill because finished food imports in Pakistan are predominantly for products that are either not produced here or of inferior quality so much so that despite imported goods are twice the price of local products, consumers still go for the former. These policies will give the black market and smugglers an opportunity to bring these goods in the market which may put the businesses directly at risk and affect the entire supply chain.

The new policies could have seen a more gradual enforcement with food businesses being notified well in advance in order to find workable solutions rather than having to deal with an abrupt implementation. The key to survival is cutting the costs while working on profits and becoming more effective.

The writer is a Karachi based freelance columnist and is a banker by profession. He could be reached on Twitter @ReluctantAhsan

Check Also

Booming IT sector can be the top export industry of Pakistan

Booming IT sector can be the top export industry of Pakistan

Pakistan’s Information Technology (IT) sector has a promising future with its talented youth, and is …

Leave a Reply